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CMO Council Study Finds Marketers Under-value Loyalty Programs

January 26, 2010
PALO ALTO, CA—January 25, 2009—As more marketers turn to loyalty and rewards programs to spark business growth, a new report from the Chief Marketing Officer (CMO) Council report indicates that marketers are under-valuing these often costly programs even as customers give the perks, discounts, deals and additional service opportunities high marks. Both customers and marketers agree: deeper engagement and personalized contact drives loyalty, not mass blast communications and gimmicks.

Loyalty Leaders: Feeling the Love from the Loyalty Club is the latest research from the CMO Council, tapping into the insights of over 600 marketers, and gaining first hand perspective from the recipients of these programs in an audit of over 700 consumers. Sponsored by InfoPrint Solutions Company, a joint venture between Ricoh and IBM, the study shows that loyal consumers expect marketers to understand them better and deliver more relevant and valued offers. Unfortunately, marketers are not giving themselves high marks in meeting the needs of their business, and question their ability to meet the needs of the customer. Given that over $2 billion is spent annually in growing and running loyalty and rewards programs, this raises questions about the value and return of investments in this area of customer relationship and insight building.

The Marketer’s View

Most marketers (61 percent) believe that loyalty program participants are the best and most profitable customers. So it is not surprising that an almost equal number of respondents (65 percent) view customer loyalty program investments as a very essential, or a quite valuable part of the marketing mix. Unfortunately, only 13 percent of respondents believe they have been highly effective in leveraging loyalty and brand preference among club members, and nearly 20 percent don’t even have a strategy for this. Another 25 percent admit they have not mobilized brand loyalists to become active advocacy agents, either.

The study also reveals that marketers are mostly inducing loyalty with discounts or free products and premiums rather than quicker, better service or improved customer handling. Some 39 percent of respondents view discounts and savings as the key member benefits, 34 percent view free products and premiums as essential incentives, while 33 percent are committed to offering points for merchandise redemption as a further motivator.

When asked to outline typical customer complaints about loyalty programs, nearly 30 percent of marketers report that some customers see little or no added value to becoming a loyalty member; 24 percent indicate rewards lack substance; a similar percentage feel they don’t get enough personalized attention; and 21 percent have problems with receiving too much spam email and junk mail. Customer complaints also touch on a lack of individualized communication (23 percent) and issues with redeeming points and miles (18 percent).
 

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